Cisco will need to tackle these high-tech issues in 2016

As it sets its sights on becoming the No. 1 IT company in the industry, Cisco will continue to face challenges and opportunities in virtually every IT market. Here’s an arbitrary list of 10 areas that will impact Cisco in 2016 as the company evolves to address emerging trends that are shaping the industry in the coming year and beyond.

The antithesis of Cisco is disaggregation, taking off the shelf switching hardware and mixing and matching multivendor and open source operating systems to run it. It decouples the dependencies and integration of the hardware and software, which Cisco argues is an integration and total cost of ownership nightmare. But the big cloud companies are using it and eventually the enterprise, so Cisco will need to continue to address it by offering compelling consumption options in addition to competitive product. Perhaps uncoupling its own? (Read all Network World's predictions for next year.)

One of those consumption options – and perhaps the most lucrative – is the subscription and licensing model Cisco is adopting. CEO Chuck Robbins recently told us that any product customers want to purchase as-a-service is on the table. ACI’s policy engine could soon be a cloud service. Perhaps Cisco could offer an interesting as-a-service option for uncoupled hardware and software, whether its own or partners.

Security spending is expected to dominate IT spending, making up as much as 75% by some estimates. Cisco has its sites set on returning to double digit growth in security this fiscal quarter, which ends in January. Cisco registered 7% annual growth in its fiscal first quarter and only 4% in fiscal 2015’s fourth quarter. Recent acquisitions like OpenDNSand Lancope will be key to accelerating that. For such a key network element and a dollar magnet, Cisco’s security business is less than a half billion in revenue.

Another partnership is the one with Ericsson, a clear response to the industry consolidation gripping the IT industry. Perhaps more a direct response to the Nokia/Alcatel-Lucent tie-up, the Ericsson deal may also signal how Cisco plans to respond to megadeals between rivals and partners, like Dell/EMC. Perhaps too big to merge, partnerships might enable Cisco and another titan to respond more quickly to market demands while the merging competitors are bogged down with operational integration. No matter what course Cisco chooses to pursue, consolidation among its rivals, and its partners, will be an issue the company will have to continue to respond to in 2016 and beyond.

Cisco’s router business declined 8% in the first quarter due to timing issues with some big transactions. Robbins expects growth to return this current fiscal quarter, and referred to new routing products developed by Cisco’s alpha internal start-up program fueling that growth. Cisco is also looking for an inflection point in data center switching in the second half of 2016 in which newer products like the Nexus 9000s and 3000s will offset some of the decline in the company’s historical architectures. While switching growth was 3% in the first quarter, analysts only expect about 1% revenue growth in Q2 and perhaps less than 2% for the entire fiscal 2016 year. As it did with routing, Cisco might lean on the alpha start-up teams to accelerate switching growth in 2016.

Acceleration is the operative word with Cisco’s Internet of Everything (IoE) ambitions in 2016. Cisco is one of the main drivers behind IoE and Internet of Things (IoT), and Gartner expects the phenomenon to explode next year and beyond. That pace at which cities and countries digitize, sensor networks expand and machine-to-machine communications spread will be a key determinant in Cisco’s growth in 2016 and thereafter.

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